11 Rules For Better Trading

Money Management

Market Timing

Things To Know

Friday, October 30, 2009

Figure 1 is a daily chart of the S&P500 with the amount of assets in the Rydex Money Market Fund in the lower panel.

Figure 1. S&P500 v. Rydex Money Market/ daily

Figure 2 is a daily chart of the S&P500 with the amount of assets in the Rydexbullish and leveraged funds versus the amount of assets in the leveraged and bearish funds.

Figure 2. Rydex Bullish and Leveraged v. Bearish and Leveraged/ daily

Ok, this is my brief interpretation of yesterday's price action. The big GDP print was already priced into the market, and it should not have been a surprise. With the Dollar down and everything else up again, one would can say two things: 1) nothing has changed; 2) if things are so good why are rates so loose?

In any case, with respect to the Rydex market timer (which is only a representative sample of market participants), there is no doubt that many are feeling relieved having been relieved of their losing positions. Let's put it this way, if you put on a short term trade on Friday or Monday, you got your head handed to you, and I am sure you were heard muttering, "I will never do that again - just get me out." So we get a nice pop yesterday on old news, and you are gone - out of the markets and licking your wounds and maybe a little light in the pocketbook. You sold into this 2% lift. The Rydex numbers appear to support such a notion as the number of leveraged bulls decreased and the amount of assets in the Rydex Money Market Fund slightly increased.

In sum, the Rydex market timer has been bailed out and is bailing out!